Airlines poised for 2013 growth

Thursday, January 03, 2013

After a positive 2012, U.S. airlines have room to grow and are well positioned for a strong 2013, according to an analysis by Dahlman Rose & Co.
This growth, however, will come mainly on the passenger side, with little or no benefit from cargo.
The investment firm Dahlman Rose & Co points to a number of factors fueling growth for these airlines. Improving balance sheets, traffic in the second half of December that exceeded expectations, and currently stable fuel costs are all reasons to celebrate a strong airline industry in 2013. The firm also noted pent-up demand in the Northeast will lead to a robust January for airlines.
According to the firm, United Airlines and Delta Air Lines will be the front runners next year. The Centre for Aviation’s rank of the top airlines in 2012 seems to bear out this reasoning. United and Delta, it reported last month, are the top two airlines in the world. But the airline landscape, at least in the United States, could change rather quickly, Dahlman analysts wrote in a guidance report.
“The major question investors seem to have is when US Airways and American will announce a merger,” the company wrote. “American’s board is meeting January 9, so there may be an announcement following that meeting, since we expect it to take the issue up at that time.” Thoughts that a merger would come soon only intensified after American’s pilot union approved a memorandum of understanding outlining changes that would take place during the proposed merger.
The analysts also foresee a limit to passenger capacity growth and reason that if fuel prices go up, airlines will be forced to raise passenger ticket prices to make up for the cost hit. A continued uncertainty about fuel and Delta’s unfunded pension problems are two issues that might cloud the airline-growth picture in 2013.
According to previously released figures from the International Air Transport Association, airlines worldwide will return an $8.4 billion profit in 2013, a slight increase over 2012’s projected total of $6.7 billion. Cargo demand will increase this year by 1.4 percent after a 2 percent decline in 2012. Cargo capacity will exceed demand, according to IATA, with load factors falling by 1.5 percent. - Jon Ross